The Hungarian Civil Code defines four legal forms for commercial companies and two options for foreign investors to establish a presence in Hungary. All these commercial companies can be founded by a foreign legal entity or natural person, and a foreign individual can also serve as the statutory body. Company formation in Hungary can be achieved through these legal structures:
Minimum share capital is HUF 3,000,000, approximately €8,300, contributed to the company by its founders in the form of monetary or non-monetary contributions.
Liability of partners for the company's obligations is, as in Slovakia, limited to the amount of their contribution to the Kft.'s share capital. This means that partners' personal assets cannot be used as collateral for the company's obligations, except for a few exceptions stipulated by special legal regulations. The minimum contribution of a partner is HUF 100,000. The partner's business share, which encompasses a set of rights and obligations, is then determined by the amount of their contribution. A Kft. can also be established as a single-member company with one partner.
Company formation in Hungary in the form of a joint-stock company is strictly regulated. Joint-stock companies are the most strictly regulated legal form of commercial company in Hungary. Hungarian joint-stock companies are suitable for larger investments with a greater number of investors or shareholders; however, a company can also be established as a single-member joint-stock company.
Private joint-stock company Zrt. is established by subscribing shares to a predetermined amount of share capital, which is a minimum of HUF 5,000,000, approximately €14,000. The amount of paid-up contributions must not be less than 30% of the company's share capital at the time of establishment. Liability of shareholders for the company's obligations is limited to the nominal or issue value of their contribution.
Public limited company Nyrt. is established based on a public call for share subscription, and only a minimum share capital of HUF 20,000,000, approximately €55,900, is required. The amount of paid-in contributions must not be less than 30% of the company's share capital upon establishment. Shareholder liability for the company's obligations is limited to the nominal or issue value of their contribution.
Types of shares of a Hungarian limited company include:
Organizational unit of a foreign entity in Hungary serves to fully carry out independent and regular business activities.
Representative Branch of a Foreign Entity Its purpose is to perform routine contact functions for investors, including assisting with contract negotiations, advertising and product display, and other forms of marketing on behalf of the parent company; however, such a branch may not conduct core business activities.
Companies established under Hungarian law are free to choose their business activities. However, similar to Slovakia, some activities are subject to various legal restrictions and require specific licenses. Most manufacturing and service companies do not need an operating permit. Exceptions apply to certain regulated sectors (e.g., financial service providers, insurance companies, pharmaceutical companies, etc.). For instance, banks can only be established and operated as joint-stock companies with an establishment license issued by the Hungarian central bank. Therefore, company formation in Hungary may be subject to various additional permits.
A prerequisite for company formation in Hungary is the signing of the incorporation documents. A company in Hungary can be established by both legal and natural persons, including foreign entities. The articles of association or partnership agreement (or other founding document, depending on the legal form of the commercial company) signed by the founders must be certified by a Hungarian lawyer, who will then submit the articles of association along with other documents to the registration court.
Company Formation in Hungary is subject to company registration in the Hungarian Commercial Register. Registration is a prerequisite for the establishment of a Hungarian company. After the founding documentation is certified by a Hungarian lawyer, an application for registration of the company in the Commercial Register must be submitted.
The application for registration of a Hungarian company must be submitted within 30 days from the date the documents are certified by a lawyer. The registration process for a Hungarian company is only possible online – electronically.
When the registration court accepts the application for registration, a certificate will be issued to the company with its name, address, temporary tax and statistical number, and registration reference number. Upon receipt of the aforementioned certificate, the company may begin operating as a pre-established company. This means that the company can operate as a company registered in the commercial register, but special provisions regarding the personal liability of the founder(s) apply. A pre-company may carry out commercial activities, but it may not carry out commercial activities requiring an official license.
After the company is registered by the final decision of the registration court, it ceases to operate as a pre-company, and all transactions concluded in this capacity will be treated as if they were concluded by the commercial company.
In this case, the commercial register registers the company within one day from the date of filing the application for registration of the company in the commercial register. However, with simplified filing, only a simplified prescribed form of founding documentation can be used. A public limited company cannot be established using the simplified form.
In this case, it is not necessary to use a prescribed and restricted form of founding documents, but their content can be freely determined by the founders. The only restriction on their content is within the wording of the law. The commercial register decides on the establishment and registration of the company within 15 working days from the date of receipt of the submission.
When establishing a company in Hungary it is advisable to consider the tax implications.
The Corporate Income Tax rate in Hungary is 9 % of the tax base.
Dividend tax paid to Hungarian tax residents is 15%. The dividend tax rate for dividends paid to a partner of a Hungarian Kft. company that is a Slovak legal entity is 0%. The dividend tax rate for dividends paid to a partner of a Hungarian Kft. company that is a Slovak natural person is 15%.
The Value Added Tax rate in Hungary is 27%. Nevertheless, two reduced VAT rates of 5% and 18% are also applied.
Tax legislation for calculating taxable income for corporate income tax allows for calculation with amortization. Accounting is based on net value: depreciation increases a company's pre-tax profits, while amortization under tax law reduces a company's pre-tax profit. In certain cases, tax law allows for amortization or permits accelerated depreciation (e.g., intangible assets, etc.).
Local municipalities may levy taxes on land and buildings located within their territory. They may also impose taxes on business activities conducted within the municipality's territory. A frequently introduced local tax is the local business tax. The amount of the local tax is deductible for corporate income tax purposes and is calculated based on trading profit. The maximum rate for the local business tax is 2% of the tax base.
Hungarian legislation requires companies to have at least one bank account in Hungarian Forint (HUF). The bank account must be opened within 15 days of the company's registration. In most cases, the personal presence of the managing director is required to open a bank account.
Registration Fees for company formation in Hungary are as follows, depending on the legal form:
Publication Fees for Hungarian companies in the commercial register are as follows:
and VAT ID assignment for a Hungarian company is significantly simpler and faster than in Slovakia. In Hungary, a company can be registered for VAT immediately upon its establishment, without lengthy processes. It is sufficient to state this requirement to the registration court when submitting the application for the company's entry into the commercial register.
Establishing a company in Hungary also requires the following registrations. Newly established Hungarian companies must register for local taxes in the relevant municipality, with the tax office, the statistical office, and the social security administration after their formation.
General Requirements for Statutory Representatives (managing directors, board members, etc.) of Hungarian companies are as follows:
To help companies new to the Hungarian market, we have developed a wide range of services covering the necessary administrative support for starting a business, followed by a complete package of accounting, tax and payroll outsourcing, and consulting services. We provide our clients with a service of company formation in Hungary of high quality.
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